China pork producer WH Group quarterly profit falls 21%
Lower sales and weak prices drag down revenue
Beijing — Chinese pork producer WH Group on Monday reported a 21% fall in first-quarter attributable profit, dragged down by weak fresh pork prices in all markets and lower sales volumes in the US.
Higher raw material and other costs in China and oversupply in the US hog market hurt overall profits, said the company, the world’s largest pork producer. The average hog price in the US fell 17% in the quarter versus the same period in 2018.
WH Group said attributable profit, before biological fair value adjustments, decreased by 21.3% to $196m, while operating profit fell by 10% to $341m.
The group, which owns US-based Smithfield Foods, said a later Easter holiday compared with 2018 undermined sales of packaged meats in the US, and exchange rates in China also hit revenue that came in at $5.28bn, a 6% fall.
Oversupply and weak prices in the US and Europe pushed operating losses in hog production to $168m from $13m in the quarter, it said.
The group’s Chinese unit, Henan Shuanghui Investment and Development, however, said in a separate announcement on Monday its net profit in the first quarter rose 20.3% to 1.28- billion yuan ($190.16m).
Shuanghui slaughtered 4.7 million pigs in the reported period, about a fifth more compared to a year earlier, as the firm took advantage of relatively low hog prices before China’s Lunar New Year holiday in February and the impact of African swine fever, a deadly disease that has swept across the country.
Hog prices were under pressure earlier in 2019 as measures to tackle an outbreak of African swine fever, a deadly disease that swept across China, led to a build-up in inventory in many parts of the country.
But WH Group also said that external sales volumes of fresh pork in the quarter were stable at about 1.1-million tons.
The company did not comment on the potential impact of rising raw material prices.
African swine fever, which is fatal to pigs but does not harm people, has caused huge losses in the world’s largest hog herd, pushing up the price of live hogs since March.
Prices in China could jump by 70% in the second half of the year, said an agriculture ministry official earlier in April.
Rising pork prices are also expected to put pressure on major overseas processors such as Hormel Foods, as surging imports from China drive up global prices.